How useful are storage leaderboards?
As the battery storage market becomes increasingly complex and competitive, many battery storage asset owners are now using optimisers to manage their assets and capture as much revenue from the different markets as possible. Choosing an optimiser and monitoring their performance is crucial but can be difficult, and so a number of owners are looking to benchmark their optimisers against the market using leaderboards. This is a tempting approach, with all this data brought into one easy-to-understand number that can be used to report to boards and stakeholders.
We think leaderboards are very useful, which is why we developed the industry’s first leaderboard to help asset owners quickly compare performance and strategies against competitors. In the right context, a leaderboard is a great way to benchmark performance in the market and answer questions on strategy with high accuracy, for example, to assess large thermal assets, with revenues so dominated by wholesale and balancing actions. However, the battery revenue stack is complex and many of the revenues won’t be visible to anyone but the optimiser. In these cases, leaderboards are a good place to start, but without the ability to dive into the details and ask the right questions, you may be missing a large piece of the puzzle. That’s why we’ve recently introduced a battery optimiser report into Enact to dive into the details and go beyond the leaderboard.
Going beyond the leaderboard is crucial in understanding why one optimiser has outperformed another
The LCP Enact leaderboard takes all known actions of each asset owner and optimiser and summarises these revenues by market, giving a quick comparison on how revenues stack up between competitors. The ability to see that one optimiser’s revenue in one market has outperformed another is important, but more important is understanding how they have achieved this. For example, a clever bit of trading to opt-out of Dynamic Containment (DC) when opportunities in the wholesale market are more attractive, as we saw some do in January, can bolster revenues above the market benchmark.
Click to zoom in
Source: LCP Enact. Blue line – the day ahead price. Yellow area – wholesale profits. This storage asset exited Dynamic Containment to chase high wholesale price opportunities, ultimately outperforming others.
But revenue is just half of the equation, you must also look at costs incurred by either running the battery or managing the state of charge. For example, a battery may choose to charge through declaring negative Physical Notifications (PNs), where it will broadly be buying power at the day ahead price, usually during overnight periods. But more savvy optimisers are using the new DC – Balancing Mechanism (BM) stacking approach of being able to have bids accepted through the BM to charge. Bids accepted through the BM can be near zero, or even negative, drastically reducing the cost of managing the state of charge of the asset. Similarly, a battery discharging will face the same charges as other conventional assets, and not accounting for these can grossly overestimate an asset’s profits. Enact has live estimations of these costs so the impact of these factors naturally fall out, but diving into the details can help a user identify the difference between two parties with similar revenue profiles but very different cost bases.
Click to zoom in
Source: LCP Enact. This storage asset has been charging through the BM (orange dots are accepted bid prices) rather than through the day ahead market (blue line), a drastic reduction in cost.
Leaderboard numbers and rankings are very useful, and it’s great seeing your optimiser sitting above its competitors and tempting to stop digging there. However, understanding why that’s the case is more important, and crucial in future-proofing your asset. This hasn’t been too material while DC has largely swamped the details of trading strategies, but as we see this market become saturated and prices come down, and move into more granular procurement, it will be crucial to understand why one optimiser is outperforming another – was it one or two high-risk high reward payoffs or a regular theme of outperforming the market? This is where we believe it is important to go beyond the leaderboard and be able to dive into the details of portfolio, or individual asset, performance.
That’s why we’ve expanded our leaderboard to generate a Battery Optimiser Report, allowing users to drill down into asset vs asset or optimiser vs optimiser comparisons with detailed granularity, giving immediate feedback on exactly which decisions have driven revenues and profits.
What can’t a leaderboard tell you?
The data available through publicly available sources doesn’t always tell the whole story. Chris McLeod recently wrote a great article about some other revenue streams that aren’t captured through leaderboards in his blog ‘The Value Iceberg: what’s hidden from industry leaderboards?’ , which rightly points out that revenues from NIV chasing, intraday optimisation and embedded benefits aren’t visible to leaderboards. There are more to add to this list, such as hedging strategies beyond the day ahead market, and potential on-site benefits with co-location or industrial processes. As these actions are hidden from the market, they’re also hidden from leaderboards. It’s important therefore to understand the limitations of leaderboards and to take these numbers with a pinch of salt, instead going beyond the leaderboard and using them to ask the right questions. Enact’s new reports enable users to ask those questions, by providing additional analysis that puts detailed information in the hands of both parties, so they can have an informed conversation on how an asset or optimiser has been performing.
So should you use storage leaderboards?
Using leaderboards are a great way to get a high-level overview of how different assets, optimisers and markets are performing, and LCP Enact’s leaderboard is used across industry to report on profits and performance. However, leaderboards aren’t enough to get the full picture for a revenue stack as complex as that of a battery. LCP Enact’s leaderboard is one feature in a platform of granular detail and dynamic analysis built in conjunction with traders and analysts, and our new battery optimiser reports help you go beyond the high-level numbers to understand the drivers behind leaderboard performance and to prompt more informed conversations between owners and optimisers.
So should you use a leaderboard to benchmark your optimiser? In short, yes, I think you should, but you should use it to find the right questions to ask, not to give you all the answers.
To find out more about LCP Enact’s Leaderboard and its new battery optimiser reports, get in touch at lcpenact.com.